Vietnam eliminates industrial zone CIT incentives from 1 October 2025 under Law 67/2025/QH15. Eligible projects can achieve 10% CIT rates (versus the standard 20%) with up to 4-year full exemption and 9-year 50% reduction — delivering potential savings of 50-75% over 15 years.
Decree 320/2025/ND-CP eliminates location-based incentives for industrial zones, requiring FDI enterprises to pivot toward sector-based qualification or disadvantaged-area strategies. Projects approved before October 2025 may grandfather existing incentives. Post-October investments face stricter criteria tied to encouraged sectors including high-tech, green technology, and digital transformation.
Key takeaways
- Eligible projects can achieve 10% CIT (vs. standard 20%) with 4-year exemption + 9-year 50% reduction — potential savings of 50-75% over 15 years.
- Law 67/2025/QH15 (effective 1 October 2025) eliminates location-based incentives for industrial zones. Decree 320/2025/ND-CP implements the removal.
- Projects approved before 1 October 2025 may grandfather existing incentives. Post-October projects must qualify through sector or disadvantaged-area criteria.
- Industrial zone investors: verify project eligibility immediately. Expansion projects may inherit incentives; new IZ projects will not.
Pre-2025 vs. Post-2025 Incentives: Quick Comparison
| Feature | Pre-2025 Framework (Old Rules) | Post-2025 Framework (Law 67/2025 & Decree 320) | Strategic Impact |
|---|---|---|---|
| Industrial Zones (IZ) | Automatic Eligibility: Location in an IZ often triggered preferential rates automatically. | Status Removed: “Industrial Zone” is no longer a qualifying location. Must pivot to Sector or Difficult Area criteria. | ⚠️ CRITICAL: New manufacturing projects in standard IZs face the full 20% rate unless they are High-Tech. |
| SME Tax Rates | Standard 20%: Small enterprises generally paid the same standard rate as large corps. | Tiered Reductions: - 15% for revenue < VND 3 billion (~USD 120,000) - 17% for revenue VND 3-50 billion (~USD 120,000–2 million) (domestic companies only, not yet applicable to FDI) | ℹ️ NOTE: FDI companies should monitor implementing circulars for eligibility updates. |
| Global Minimum Tax (GMT) | Not Applicable: Incentives (e.g., 10% rate) were fully realized by MNCs. | Top-Up Tax Applied: Projects with revenue >€750M may be topped up to 15% (Decree 236/2025). | ⚖️ RISK: Large MNCs can no longer bank on sub-15% effective rates; incentives are neutralized. |
| High-Tech Definition | Broad: Easier to qualify with general “advanced technology.” | Strict: Specific list of “Encouraged Sectors” (Green Tech, AI, Biotech) with local content rules. | Compliance: Requires annual verification of revenue ratios to maintain the “High-Tech” tag. |
| Grandfathering | N/A | Yes: Projects with IRCs approved before Oct 1, 2025 retain old incentives. | 🚀 ACTION: Rush pending Investment Registration Certificate (IRC) applications to beat the Oct 1 deadline. |
CIT Incentive Structures: Rates, Holidays & Qualification Criteria
Vietnam offers three primary CIT incentive mechanisms: preferential tax rates ranging from 10-17%, tax exemption and reduction periods, and qualification pathways through either location or sector criteria.
The applicable structure determines total tax liability over the investment lifecycle. For the standard CIT framework — rates, deductions, filing procedures — see the CIT Guide for FDI Enterprises.
Preferential CIT Rates (10%-17%)
Preferential CIT rates reduce the standard 20% corporate income tax to lower tiers based on project characteristics. The 10% rate applies to projects in extremely difficult socio-economic areas, Special Economic Zones, or High-Tech Zones for 15 years from the first revenue-generating year (Law 67/2025/QH15).
The 17% rate applies to SMEs with annual revenue between VND 3-50 billion (~USD 120,000–2 million) and to specific encouraged sectors not meeting the highest priority threshold.
Qualification requires meeting both location and sector conditions simultaneously. A manufacturing project in a High-Tech Zone qualifies for the 10% rate. The same project in a standard industrial zone faces the 20% standard rate under post-2025 rules.
Tax authorities require annual verification through tax filings (Law 67/2025/QH15). Changes in business activities or revenue composition can trigger disqualification.
For FDI enterprises managing multiple entities, Related Party Transactions under Decree 20/2025/ND-CP (amending Decree 132) revises interest expense deductibility caps and related party definitions — directly impacting consolidated CIT taxable income.
Tax Exemption & Reduction Periods
The standard incentive package: 2-year full CIT exemption followed by 4-year 50% reduction of the applicable preferential rate (“2 miễn 4 giảm”). Enhanced incentives for priority zones extend to 4-year exemption plus 9-year 50% reduction (“4 miễn 9 giảm”) under Law 67/2025/QH15.
The exemption period begins in the first profitable year — the first year the enterprise generates taxable income. If profitability is not achieved within three years of generating revenue, the exemption period automatically starts in the fourth year. This “4th year rule” under Law 67/2025/QH15 Article 14.4 prevents indefinite deferral.
In practice, tax authorities scrutinize profit timing closely. Enterprises must maintain documentation proving genuine operational losses during pre-profitable years to avoid penalties for artificial profit deferral. Proper accounting services implementation ensures financial reporting under VAS accurately reflects profit recognition for tax authority review.
Location-Based vs. Sector-Based Incentives
Two qualification pathways exist: location-based incentives for projects in extremely difficult socio-economic areas, Special Economic Zones, or High-Tech Zones, and sector-based incentives for encouraged industries including high-tech manufacturing, green technology, digital transformation, and supporting industries.
Projects may qualify through either pathway under Law 67/2025/QH15. Combining both does not create additional benefits beyond the maximum 10% rate and 4-year exemption plus 9-year reduction package.
| ⚠️ COMPLIANCE ALERT: Industrial zones lose location-based incentives from 2025 per Decree 320/2025/ND-CP. Projects in industrial zones must now qualify through sector-based criteria or relocate to disadvantaged areas to maintain preferential treatment. |
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Law 67/2025 and Decree 320/2025: The New FDI Tax Playbook
Law 67/2025/QH15 (effective October 1, 2025) eliminates automatic incentives for industrial zone locations — requiring immediate strategic review for all FDI projects in planning or expansion phases.
Law 67/2025/QH15: Effective 1 October 2025
The new law fundamentally restructures incentive eligibility by removing industrial zones from the list of qualifying locations for preferential CIT treatment. Projects approved and commencing operations before 1 October 2025 may continue under existing incentive approvals through grandfathering provisions.
Projects approved after this date must qualify through encouraged sector criteria or investment in extremely difficult socio-economic areas, Special Economic Zones, or High-Tech Zones.
Key changes: tighter definitions of “encouraged sectors” with specific technology transfer and local content requirements, stricter revenue threshold monitoring to prevent incentive abuse through artificial business splitting, and enhanced documentation requirements for annual compliance verification.
These reporting obligations require precise data segregation — a capability now mandated under Circular 99/2025, which replaces Circular 200.
Decree 320/2025: Industrial Zone Incentive Removal
Decree 320/2025/ND-CP (effective December 15, 2025, implementing Law 67/2025/QH15) eliminates incentives based solely on Industrial Zone status. However, projects in IZs located within designated disadvantaged areas may still qualify under the ‘difficult area’ criteria. FDI enterprises should verify zone classification immediately.
This affects thousands of existing and planned FDI projects that selected industrial zone locations specifically for tax benefits. The decree provides no transition period for new projects—any investment approved after 1 October 2025 in an industrial zone receives standard 20% CIT treatment unless the project independently qualifies through sector-based criteria.
To assess project eligibility under the new framework:
- First, verify the Investment Registration Certificate approval date — pre-October approvals may retain incentives.
- Second, review business sector classification against the encouraged sectors list in Article 12 of Law No. 67/2025/QH15.
- Third, calculate whether relocation to a Special Economic Zone or disadvantaged area generates sufficient tax savings to justify relocation costs.
- Fourth, evaluate expansion project treatment — existing facilities may extend incentives to expansions if the expansion maintains the same business line and meets capacity and capital thresholds specified in Law 67/2025/QH15 and Decree 320/2025/ND-CP.
For multinational enterprises with operations in Vietnam, Vietnam’s global minimum tax obligations under Decree 236/2025/ND-CP may interact with CIT incentive calculations, particularly when incentive rates fall below the 15% Pillar Two threshold. Groups in scope should review the GMT filing requirements — including CE nomination deadlines and VAS-to-IFRS reconciliation — before incentive elections.
The decision matrix for industrial zone investors: remain in the industrial zone if the sector qualifies for incentives regardless of location (high-tech manufacturing, renewable energy, digital infrastructure).
Relocate to a Special Economic Zone or High-Tech Zone when location-based incentives are critical and relocation costs are recoverable within 5-7 years through tax savings.
Accept standard 20% CIT if neither sector qualification nor relocation is feasible, and optimize through other mechanisms such as transfer pricing or regional headquarters structures. After CIT optimization, distributable profits follow standard profit repatriation procedures through the DICA.
Expansion Projects: Inheriting vs. Losing Incentives
Expansion projects may inherit existing CIT incentives if the expansion maintains the same business sector, occurs within the same legal entity, and meets a minimum 20% increase in fixed assets or production capacity (Law No. 67/2025/QH15). Expansions exceeding this threshold or involving new business lines are treated as separate projects.
Exceptions apply for expansions mandated by government industrial policy, such as local content requirements or technology upgrade directives. Special cases include expansions in Special Economic Zones where the original project predates the zone’s establishment—these may qualify for enhanced incentives even if the expansion occurs post-2025.
The compliance checklist for expansion project qualification includes: original Investment Registration Certificate with incentive approval, business registration showing continuous operation in the same sector, audited financial statements proving the expansion does not exceed capital thresholds, and written confirmation from the provincial Department of Finance (formerly Department of Finance (formerly DPI)).
For enterprises with foreign contractor involvement in expansion activities, foreign contractor tax Vietnam withholding obligations must be segregated from CIT incentive calculations to prevent revenue threshold contamination.
| ⚠️ COMPLIANCE ALERT: Verify project eligibility pre-1 October 2025 under new Law 67/2025/QH15—grandfathering rules apply only to projects with approved Investment Registration Certificates before the effective date. |
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Compliance Risks & Common Violations
CIT incentives are revoked retroactively when enterprises fail to maintain qualification conditions, triggering back-tax assessments, interest charges, and administrative penalties. Understanding common disqualification triggers prevents costly compliance failures.
Common Disqualification Triggers
Tax authorities audit incentivized projects for three primary violations: revenue threshold failures (where non-incentivized revenue exceeds 30% of total revenue, as specified in Law 67/2025/QH15), sector deviation, and location changes, including relocation of production facilities outside the approved incentive zone.
Exceptions exist for force majeure events, including natural disasters, government-mandated relocations, or pandemic-related business interruptions, provided the enterprise notifies tax authorities within 30 days and receives written approval for temporary non-compliance.
Government-approved modifications to the Investment Registration Certificate that change business scope may preserve incentives if the new scope also qualifies, but this requires proactive application rather than automatic continuation.
Enterprises managing VAT refund for investment projects in Vietnam must ensure that VAT refund claims do not distort the revenue composition used for CIT incentive threshold calculations.
Penalty Framework
Penalties for CIT incentive violations include back-taxes calculated at the difference between the preferential rate paid and the standard 20% rate for all disqualified years, interest charges on unpaid CIT amounts, and administrative fines for late payment or non-declaration (Law No. 67/2025/QH15).
Interest accumulates from the original tax payment deadline of each disqualified year, creating substantial liability for violations discovered years after occurrence.
If-then scenarios:
- If revenue threshold violation occurs in Year 3 of a 4-year exemption period, then the enterprise owes back-taxes for Years 1-3 plus interest from each year’s filing deadline.
- If sector deviation is discovered during a tax audit, then incentives are revoked from the first year of deviation, not the audit year.
- If location change occurs without Investment Registration Certificate amendment, then all incentives are disqualified from the project’s inception, regardless of prior compliance.
Reality Check: Law vs. Practice
Law on Corporate Income Tax No. 67/2025/QH15 states that projects meeting published criteria automatically qualify for incentives. In practice, tax authorities require proactive annual documentation: letters confirming sector classification from the Ministry of Planning and Investment, quarterly revenue reports segregating incentivized and non-incentivized income, and site inspection reports.
The key risk is assuming automatic continuation—enterprises must file incentive eligibility confirmation annually as part of the CIT finalization process, and failure to submit supporting documentation results in incentive denial even when substantive qualification exists.
The compliance checklist for annual review includes: Investment Registration Certificate remains valid and unmodified, business registration reflects current activities matching the certificate, audited financial statements show revenue composition within thresholds, production facilities operate in the approved incentive location, and all quarterly CIT prepayments applied the correct preferential rate.
Chief accountant responsibilities include oversight of this annual compliance documentation, with statutory accounting requirements mandating quarterly review cycles.
The October 2025 transition creates three immediate action items: audit current projects against Law 67/2025/QH15 criteria to confirm grandfathering eligibility, evaluate whether expansion plans qualify through sector-based criteria or require relocation, and implement quarterly compliance monitoring to prevent multi-year disqualification from revenue threshold violations.
For CIT incentive eligibility assessment and strategic restructuring, engage specialized tax advisory support before the deadline.
This article reflects CIT incentive regulations as of March 2026 under Law 67/2025/QH15, Decree 320/2025/ND-CP, and Decree 236/2025/ND-CP. Tax incentive rules are subject to implementing circulars — consult qualified tax advisors for compliance guidance specific to each enterprise’s investment structure.
